Transcript Country Market Analysis - Farmer School of Business

Country Market Analysis
Lipton Iced Tea in Argentina
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Price
Argentina’s Economy
Economic recession from 1998 to
early 2003
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unpredictable inflation (see
chart)
devaluation of the paeso
Mounting social problems
 Unemployment rate of 17.3%
for 2003
 51.7% of the population is
below the poverty line (2003)
Past inconsistency of the economy
may have an impact on the size of
our target market.
Inflation Rate
Inflation Rate (%)
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30
25
20
15
10
5 -1.8%
0
-5
25.9%
7.7%
-0.7%
1%
Year
1999
2000
2001
2002
2003
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Price
Argentina’s Economy
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Nominal GDP has grown from $289 billion in 2001 to $435.5
billion in 2003.
 GDP real growth rate: -14.7% (2002) to 8.7% (2003)
 GDP per capita: $10,200 (2002) to $11,200 (2003)
While there have been economic problems in the past, the
recent upswing of the economy is encouraging with increasing
disposable income of consumers’ and, in turn, increased
consumption.
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Price
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MERCOSUR
Customs union that includes Argentina, Brazil, Paraguay and
Uruguay, with Chile and Bolivia being associate members, and
Venezuela has requested membership.
The General Agreement on Tariffs and Trade (GATT)
Allows for free trade between member states
Both of these groups would allow for easier importation of
needed materials into Argentina for production of iced tea.
Even though, trade is open to all potential exporters and
importers however unclear customs requirements, inspections
and product standards licensing procedures increase the cost
of trade.
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Price
Competition
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Soft Drink Competitors
 Pepsi (including Pepsi, Pepsi Light, 7-Up, 7-Up Light) are popular soft drinks
 Coke is another popular carbonated beverage in Argentina
 Navita (manufactured by Coke) is a soft drink that is flavored with the
national beverage mate
 Sukita is a popular orange soft drink in Argentina
 Pomelo an increasingly popular fizzy grapefruit drink
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Main focuses: youth, pop-culture, celebrity endorsers
Average retail price of a 473ml soft drink is $.99
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Price
Competition
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Juice Competitors
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Kasfruit Juice, Kas, Tropicana and Gatorade
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Orange juice is a popular drink that is extremely expensive
Nectar concentrates which is a sweet juice based drink
Apple juice is another beverage of choice in Argentina
A popular combination is fruit juice and milkshakes in areas of the
country where more exotic fruits grow
Average retail price for 946ml juice is $4.79
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Price
Competition
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Bottled Water
 Eco de los Andes
 Glaciar
 Nestle Pureza Vital.
Main focuses: pure, natural, and good for your health.
Average retail price of 500ml of mineral water is about $1.00
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Price
•Decrease in growth rate percentage → Economic recession (1998-2003)
•Stabilized growth rate → Upswing in Economy
•This should not be a deterrent in entering the new age beverages market in
Argentina
*New age beverages includes herb based drinks, iced coffees and iced teas.
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Product
Labeling Requirements
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Name (description of product)
Country of origin
Quality, purity, or blending description
Net weight
Metric System
Spanish Language (exception: foreign words and phrases of common usage)
 Differs from Mexican or Chilean Spanish
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It would be in the best interest of Lipton Iced Tea to use Spanish language
media and labels in Argentina.
Business Implications
Due to all of these restrictions on labeling Lipton Iced Tea will have to
change not only the language of it’s labels but also the content of their labels
and the measurements of the product. A local adaptation of the packaging
will be necessary.
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Product
Bottle Composition
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Pop – plastic
Water – plastic
Gatorade (sports drinks) – plastic
 Usually small convenience sizes
that may be consumed on the
go
Juice – Cartons
Aluminum isn’t as widely used
because it’s hard to come by
Recyclable packaging
By knowing the common forms of
packaging in Argentina Lipton will
be able to decide which material to
use to package it’s iced tea.
Percentage Volume Retail Sales
70%
60%
50%
40%
Pop
Bottled Water
Juice
30%
20%
10%
0%
<500 ml
1L
1.5 L
2L
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Product
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Mate is the national drink of
Argentina
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Benefits- a hot tea and
stimulant
Being such a popular drink in
Argentina it might be wise to
consider a mate flavored iced
tea to appeal to that segment
of the market. Coke has
successfully done this
Popularity of Mate may
cause problems in
introducing cold tea
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Place
Disadvantages of Importing
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Imports vs. Exports for food and beverage market
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Imports 5%
Produces 95%
Major challenge → knowledge
Higher retail price
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Place
Unilever’s Production Facilities
Food Product Production Centers:
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Florida Plant (Buenos Aires Province):
produces soups, purees, pastas, salsas, prepared
meat Principal products include: Knorr
Mendoza Plant ( Mendoza Province): produces
dehydrated vegetables
Pilar Hellmann’s Plant (Buenos Aires
Province): Produces mayonnaise, mustard and
salsa Principal products include: Hellmann’s
AdeS, Ri-K, Fanacoa, Wilde
Pilar AdeS Plant (Buenos Aires Province):
produces AdeS a soy product
La Rioja Plant ( La Rioja Province): produces
olive oil, garlic and pasta, mustard Principal
products include: Arisco, Beira Alta, Copisi,
Malaguena, Petisco, Palmeiron, Savora, Ri-K,
Fanacoa
Distribution Center
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Located in Ubicacion, Florida Plant, Buenos
Aires Province
Receives finished products from the plants
and distributes to clients and other
countries.
Daily dispatches a maximum of 280 trucks
including a maximum of 270,000 boxes
14 loading docks
Despite the fact that Unilever
produces and distributes many
food products in Argentina, they
partner with Argentinean firms for
their beverage production and
distribution.
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Place
Production Facilities
Baesa
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Main bottling company in Argentina for Pepsi
Controls 87% of Pepsi’s bottling in Argentina.
Currently in negotiations with Embotelladora Los Andes.
Vast distribution chain with over 25,000 points of sale
around the country.
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Place
Production Facilities
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Ambev
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Sixth largest beverage company in the world and largest beverage
company in Latin America
Argentine branch received Champion in the Manufacturing Excellence
Program award:
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AmBev’s network:
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Now considered a reference standard of excellence
11,000 resellers
Fleet of 16,000 trucks
41 beverage production plants Production and distribution facility in one.
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Place
Distribution
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Tibbett and Britten Group
 Seventh largest logistics service provider in the world.
 Operations in 33 countries in 5 continents.
 Revenues of approximately $2.2 billion last year.
 Unicargo Group (acquired in 2001), based in Buenos Aires, Argentina.
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Transports and Distributes food and drink products, throughout Latin
America
 Existing contracts with Unilever Bestfoods and Baesa (First largest
Pepsi bottler in Argentina)
 Handles 72 million cases per year
 A fleet of 500 commercial vehicles
 In 2000 revenue was $19 million
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Place
Business Etiquette
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More formal in Argentina than in the U.S.
Business usually conducted in leisurely manner
Prearranged meetings are a must and promptness is also
important
North American vs. American
The business etiquette of Argentina is important to know since
Lipton will be dealing with intermediaries if iced tea is
introduced into the market.
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Place
Political Implications
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Contracts:
 No specific format - can be executed verbally
 However, usually given in writing through exchange
of reversal letters
 May not elect foreign laws to govern agreement
 Argentine courts will not recognize the contract
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Place
Distribution
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Two types of traditional sales channels:
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large-scale
specialized retailers
The food retail market separated into three categories:
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Traditional (“mom and pop”) retailers
Self-service mini markets/Convenience stores
Supermarkets/Hypermarkets
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Place
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Traditional Retailing
Decrease in popularity:
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1970 – 90% of total sales
2003 – 20% of total sales
Inefficient logistics:
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Outdated
Costly
Longer delivery times
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Place
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Self-service Mini Markets/Convenience Stores
Self-service mini markets = 26% of total sales (2002)
Convenience stores = 4% of total sales (2002)
Convenience stores becoming more popular
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Increased competition for traditional retailers
Typical customers and customer habits:
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Middle and upper-class as well as youth
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Impulse purchases
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Place
Supermarkets/Hypermarkets
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Market dominance:
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Lower priced items:
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36.7% of total sales (2002)
Purchase directly from producers
Stock larger quantities (economies of scale)
Consumer Behavior:
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Price vs. Value
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Decline in Import purchases
Convenience
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Place
Infrastructure
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80% of products transported with trucks
 Shelf Life = 18 months
 Storage = closed container, cool dry place
There are no special needs to have refrigerated trucking to ship Lipton
Iced Tea in Argentina however, special care will be needed to ensure that
the tea is not transported/stored in extremely high temperatures.
National Highways Rehabilitation and Maintenance Project:
 $450 million loan to rehabilitate the national road network.
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Paved Highways=215,434 km
Unpaved Highways=151,881 km
Argentina is spending money on their infrastructure so this will be an aid
in getting our product to the consumer.
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Promotion
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Population = 39,144,753
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Median age = 29.2
 More youthful promotional campaign.
1 female to .97 males
 Target both males and females equally
Urban areas = 80% of total population
 Buenos Aires (and suburbs) = 35% of total population
 Cordoba, Rosario and Mendoza = 10% of total
population
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Promotion
Past Economic Recession Affecting Promotion
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Effect of economic recession on media sector:
 Circulation volumes, subscription fees, and the level of
advertising spending decreased
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Effect of economic recession on consumer behavior:
 Argentine consumers:
 More demanding and knowledgeable
 Starting to look more at quality, novelty, flexibility, fastdelivery, and after-sales service
 Stabilizing inflation = more attention to small price
differences
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Promotion
Consumer Behavior
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Argentine consumers resemble Europeans very closely
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European promotions may be used with a slight localized adaptation
Segmentation is key:
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Typically drink wine or mineral water with meals
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Lipton Iced Tea Target = impulse purchase drink that can be enjoyed “on the
go.”
Lack of storage space and small disposable income = more frequent trips
to the store
Environmentally friendly attitudes:
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brand image with differentiated segmentation will be crucial.
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Promotion
Growing Consumer Segments
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One-person households (17% of the total Argentine households)
 Value practicality and often pay premium prices in return for service that
allows them to save time.
 Perform frequent and small purchases and use convenience channels.
Double Income Couples Without Children
 High disposable income
 Purchase high value-added products and services
 Urgency to save time = increased services (such as delivery, automatic
tellers and telephone banking)
Households sustained by a working woman
Consumers over 60 years old.
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Promotion
Print
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High literacy rates (97.1%) → print media is the
most widely used and effective method of
advertising.
International papers and magazines, including a
wide range from the U.S., are widely available at the
numerous kiosks to be found around Buenos Aires.
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Promotion
Television
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High penetration rates:
 Paying TV subscribers in
Latin America = 58%
Potential audience
approximately 21 million.
10 million TV sets in use
The public and private sectors
operate radio and television
stations.
200 cable companies operate
throughout the country.
Generally aimed at the Buenos
Aires market
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46 television broadcasting
stations
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Major National TV Channels:
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America TV
Argentina Televisora Color
ATC
Libertad
Telefe’
Artear
Cable television channels:
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CNN International,
CNN en Español,
MTV,
As well as channels from Brazil,
Chile, Mexico, France, Germany,
Italy and others
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Promotion
Radio
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170 AM stations
2000 FM radio stations
Approximately 12 million radio sets
Estimated average weekly listener audience = 21
million.
Generally aimed at the Buenos Aires market
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Promotion
Internet
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4.1 million internet users in Argentina compared to 165.75 million in the U.S.
High access cost → limited use of the internet
Argentina hosts 11 of the top 15 most visited Spanish language sites
Approximately half of the 700 Internet start-up companies in Latin America are
based in Argentina
Increasing popularity of Internet advertising
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Beginning stages
Development of E-commerce is limited:
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Internet illiterate consumers
Prefer the security of direct purchasing
Slow introduction of online retail
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Promotion
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Advertising Expenditure By Medium
Television $245 million
Radio $45 million
Print $204 million
Cinema $15 million
Outdoor $62 million
Online advertising is currently an untapped medium
for advertising.
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Promotion
Media Costs
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Television (peak time):
 Avg. Cost for :30 is $2,996
Avg. Audience 129,153
= 2.3 cents per person
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Radio (peak time):
 Average cost for :30 is $441
Avg. Audience 34,533
= 1.3 cents per person
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National Newspapers (1 page black
and white advertisement ):
 Average Cost is $15,370
Avg. Audience 149,942
= 10.5 cents per person
Magazines (1 page four color
advertisement):
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Average Cost is $ 5,984
Avg. Audience 63,866
= 9.3 cents per person
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Outdoor:
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Billboards
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Average Cost 1 month is $87,365
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Posters
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Average Cost 1 month is $8,333
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Subway Boards
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Average Cost 1 month is $ 161
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Taxis
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Average Cost 1 month is $23,473
Cinema:
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Average Cost for :30 for 4 weeks is
$95,500
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Promotion
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Introduction of Lipton Into Brazil
Flavors: lemon and peach
Sizes: 340 ml, tetra pack 1 liter, PET 1.5 liters, tetra pack
250 ml
Produced and distributed by Ambev
October 1999 Lipton Iced Tea reached the leadership
position of the cold tea market
Given the geographical proximity and cultural ties of
Argentina and Brazil this information is promising for the
iced tea market in Argentina.
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Promotion
Lipton’s Current Strategies
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Worldwide Campaign: “Lipton is painting the world yellow”
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Brightness, vitality, and fun with natural goodness
Lipton Flavors: “We’ve got your flavor!”
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UK Strategy: “Don’t knock it until you’ve tried it”
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lemon, sweetened, unsweetened, green tea with honey, diet lemon, peach,
raspberry, sweet tea with or without lemon, sweet tea extra sweet
“Has a disarming honesty in that it courageously embraces the negative
and openly admits that a lot of people knock the idea of drinking cold
tea.” ~ Senior Brand Manager
Asian Strategy – Local Adaptation
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RTD tea that may be served hot or cold
Introduction of Lipton Fusions
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Promotion
Advertising Examples
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United States Promotion = Evolutions and Influences in Hip
Hop- Lipton Brisk Iced Tea
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Music Mixer Website Applet: “Mix it up your way – Lay down the tracks,
pump up the beats and be your own Mix Master”
UK Promotion = “Don’t knock it until you’ve tried it”
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T.V. Commercial - Girl chatting on the phone with a friend reaches
into fridge and inadvertently picks up and drinks Lipton Iced Tea and
to her surprise enjoys it
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QUESTIONS?
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